Today, on the three-year anniversary of the last increase in the federal minimum wage, a broad coalition of groups and activists across the country will call for a realistic raise for the lowest-income earners.
Currently, the federal minimum wage stands at a low $7.25, and North Carolina tracks this federal standard. The minimum wage used to be a much more realistic wage standard – after its creation in 1938, the value rose steadily until reaching a high point in 1968. Since that time, however, the minimum wage’s value has steadily eroded as Congress has failed to correct for inflation over time. If properly adjusted for inflation, the minimum wage would be $10.55 today.
While the minimum wage hasn’t increased in the last three years, the prices of basic goods certainly have. As NELP’s chart below illustrates, the price of tuition, food, gas and utilities have steadily climbed while the value of the minimum wage has not. $7.25 translates to roughly $15,000 per year for a full-time worker while a conservative measure of actual family costs for one adult and one child in North Carolina requires an income of more than twice this amount.
In this economy, families are relying more and more on low-wage jobs to make ends meet. As a brief released today by the Budget and Tax Center finds, North Carolina has seen the rise of a “two-tier labor market,” in which middle-income earners are increasingly finding themselves working in the growing sector of low-wage jobs such as food preparation and home health aides – jobs that pay less than $10 per hour. And this is not a trend that is short-lived. These low-wage occupations are expected to have some of the highest growth rates in North Carolina over the next ten years.
What can we do? We can invest in workers and our economy. Paying employees a fair wage is not only essential for allowing workers to put food on the table, it increases spending in local economies. Consumer spending comprises 70 percent of gross domestic product, and according to a study by the Federal Reserve Bank of Chicago, every $1.00 increase for a minimum wage worker translates to $3,500 in new annual consumer spending.
Moreover, contrary to arguments against raising the minimum wage, research has shown that a higher minimum wage does not cause job losses. Over the last 20 years, a robust body of research has looked at employment levels before and after minimum wage increases in states, counties, and metropolitan areas and has shown that raises in the minimum wage failed to lead to job losses, even during times of high unemployment. For instance, a recent study looking at business assistance living wage laws found that these standards have zero negative effect on employment levels.
There certainly is hope. Proposed federal legislation would increase the minimum wage to 9.80 per hour and raise the extremely low tipped minimum wage of $2.13 to 70 percent of the full minimum wage; 19 states now have minimum wages above the federal level ; and more states are taking action. Here in North Carolina, however, not much is happening. With the effects of the Great Recession still reverberating around the state, it’s time that lawmakers recognized the minimum wage as a key strategy for helping families make ends meet and for a sustainable economic recovery.